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Multi-Stage Contests with Stochastic Ability

  • Konrad, Kia A.
  • Kovenock, Dan

We consider the properties of perfectly discriminating contests in which players’ abilities are stochastic, but become common knowledge before efforts are expended. Players whose expected ability is lower than that of their rivals may still earn a positive expected payoff from participating in the contest, which may explain why they participate. We also show that an increase in the dispersion of a player’s own ability generally benefits this player. It may benefit or harm his rival, but cannot benefit the rival more than it benefits himself. We also explore the role of stochastic ability for sequential contests with the same opponent (multi-battle contests) and with varying opponents (elimination tournaments) and show that it reduces the strong discouragement effects and hold-up problems that may otherwise emerge in such games. High own ability dispersion selects such players into the contest and favors them in elimination contests.

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Paper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1192.

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Length: 27 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:pur:prukra:1192
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Web page: http://www.krannert.purdue.edu/programs/phd

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  1. Sherwin Rosen, 1985. "Prizes and Incentives in Elimination Tournaments," NBER Working Papers 1668, National Bureau of Economic Research, Inc.
  2. Strumpf, Koleman S, 2002. " Strategic Competition in Sequential Election Contests," Public Choice, Springer, vol. 111(3-4), pages 377-97, June.
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  4. Rick Harbaugh & Tilman Klumpp, 2005. "Early Round Upsets and Championship Blowouts," Economic Inquiry, Western Economic Association International, vol. 43(2), pages 316-329, April.
  5. Wärneryd, Karl, 1997. "Distributional Conflict and Jurisdictional Organization," SSE/EFI Working Paper Series in Economics and Finance 173, Stockholm School of Economics.
  6. Muller, Holger M & Warneryd, Karl, 2001. "Inside versus Outside Ownership: A Political Theory of the Firm," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 527-41, Autumn.
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  9. Groh, Christian & Moldovanu, Benny & Sela, Aner & Sunde, Uwe, 2003. "Optimal Seedings in Elimination Tournaments," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 140, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  10. Kovenock, D. & de Vries, C.G., 1995. "The All-Pay Auction with Complete Information," UFAE and IAE Working Papers 311.95, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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  12. Abrevaya, Jason, 2002. "Ladder tournaments and underdogs: lessons from professional bowling," Journal of Economic Behavior & Organization, Elsevier, vol. 47(1), pages 87-101, January.
  13. Konrad, Kai A. & Kovenock, Dan, 2009. "Multi-battle contests," Munich Reprints in Economics 22084, University of Munich, Department of Economics.
  14. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  15. Kai A. Konrad & Dan Kovenock, 2005. "Equilibrium and Efficiency in the Tug-of-War," CESifo Working Paper Series 1564, CESifo Group Munich.
  16. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics.
  17. Klumpp, Tilman & Polborn, Mattias K., 2006. "Primaries and the New Hampshire Effect," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1073-1114, August.
  18. Gradstein, Mark & Konrad, Kai A, 1999. "Orchestrating Rent Seeking Contests," Economic Journal, Royal Economic Society, vol. 109(458), pages 536-45, October.
  19. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
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